Consumer inflation expectations ease across horizons in June
Consumer perceptions and expectations of inflation over the next 12 months decreased significantly in June, according to the European Central Bank's Consumer Expectations Survey. Meanwhile, expectations for nominal income growth rose while spending growth expectations moderated.
Retreat on price pressures
Median perceived inflation over the past 12 months dropped to 3.6 percent in June from 4.0 percent in May, while 12-month ahead expectations fell to 3.0 percent from 3.5 percent.
Three-year ahead expectations edged down to 2.8 percent, whereas five-year expectations remained stable at 2.4 percent.
Lower-income quintiles and older respondents continued to report higher inflation perceptions and expectations than their respective counterparts.
Uncertainty regarding short-term inflation declined for the second consecutive month but stayed above pre-war levels.
Income optimism meets spending caution
Consumers raised their nominal income growth expectations for the next 12 months slightly to 1.1 percent, while perceived past spending growth fell to 5.1 percent.
Expected spending growth over the coming year also softened to 3.6 percent.
Economic growth expectations for the next 12 months became less negative at -1.4 percent, and projected unemployment decreased marginally to 11.2 percent.
Home price growth expectations eased to 3.4 percent, whereas anticipated mortgage interest rates edged up to 5.0 percent.
A fragile sentiment stabilization
The survey reveals a welcome retreat in household inflation fears alongside resilient labor market perceptions.
However, persistent divergence between lower and higher-income groups highlights hidden economic strains.
For policymakers navigating rate decisions, this underlying consumer friction remains crucial.